Studies have focused on isolation and characterization of populations of putative osteogenic cells that might serve as alternatives to the marrow stromal cell component of composite grafts. Presumptive osteoprogenitor cells have been isolated from explants of spleen fragments and from periosteal tissues (rabbits) following collagenase digestion. Three sequential lh- digests of isolated periosteum provided cell populations which, while not purely osteogenic or fibroblastic (lactate/malate DH-activity ratios equal .078-0.89), had different biochemical properties, i.e., a gradient of activity in culture with respect to their growth rate, utilization of glucose and lactate production, and concentrations of acid/alkaline phosphatase. All these parameters were highest in the 1st and 2nd hr isolates, suggesting an osteoblastic-like vs fibroblastic-like nature. A 4d in vitro resorption assay and a 3wk in vivo millipore chamber experiment suggested that each of the 3 populations had more osteoblastic-than osteoclastic-like properties. Bone formed in 7-10% of chambers loaded with each population, and cartilage was induced to form in chambers pre-loaded with an osteoinductive bone matrix. These data have enabled us to better select periosteal cell lines which will respond to inductive signals from the bony component of composite grafts.